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News/Business. Becky Quick, Joe Kernen, Carl Quintanilla. Business news and talk as the trading day unfolds on Wall Street. (CC)

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03:00:00

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mpeg2video

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New York 14, Greece 12, Becky 12, U.s. 10, Aig 10, Washington 9, China 9, Cam 7, Europe 7, Barry 6, New York City 6, Barry Knapp 6, Newark 5, Joe Kernen 4, Goldman Sachs 4, Mishkin 4, Volcker 4, Carl Quintanilla 4, Rick Mishkin 4, Toyota 4,
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  CNBC    Squawk Box    News/Business. Becky Quick, Joe Kernen, Carl Quintanilla.  
   Business news and talk as the trading day unfolds on Wall...  

    February 26, 2010
    6:00 - 9:00am EST  

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good morning. a snowicane in the northeast. today's test, fourth quarter dp dp, existing home sales and other key economic data. we'll dig into whatever it means for the markets and ask if the u.s. economy and the recovery can plow ahead, as "squawk box" begins right now. >> take a look right now at
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times square. good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and carl quintanilla. there is a major winter storm that has settled down in the northeast. that is causing problems. it is going to stir things up. we've got major economic data that is coming out today at 8:30 eastern time. first estimate put growth at an annual rate of 577%. polled economists expect that number to be revised to 5.9%. then coming up at 10:00 eastern, the commerce department will report on previously sales of exiting homes. economists say they wouldn't be surprised by a drop, either. earlier this week, the government released new home sales and reported they fell to a record low level for the month. >> pretty allowsy week for data. >> and i remember when washington got dumped on and they kept talking about it and it was like, i don't care. you're down there.
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we don't have any up here. >> the only thing that this matters for is eventually the number of storms we've seen in the northeast could have an impact on the job numbers, probably reeking all kinds of havoc with this data we're getting. >> it's interesting when it snows for 62 hours straight, pretty hard. it just keeps snowing and snowing. >> it's better than rain. >> how many trillion tons of water evaporate and condense on the planet every day. >> and right now they're all centered right here, i think. >> out of the ocean and out of the sky. >> are you talking about this new environment climate we're in right now or -- >> i just wonder when al gore sees the weather report, what does he think? >> people are insisting he give back that nobel prize. no. >> climate change, global warming. but the other story is the salt and how much money this is costing.
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>> and people were wondering, walmart same store sales, maybe that's because a lot of stores were closed for a couple of days. this plays out to just about every data you're getting. >> and there were additional snow shovels. >> that was quite a storm in washington yesterday, carl. >> it sure was, zoe. democrats and republicans speaking out on the president's health care summit yesterday. more than seven hours of gathering, ending in little progress. >> this is such a complicated issue, that it's inevitably going to be contentious. but what i'm hoping to accomplish today is for everybody to focus not just on where we differ, but focus on where we agree. >> now, the president calling for bipartisan health care action in six weeks. republicans say that time frame
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is unreasonable. of course, we went over this yesterday with some of our guests in washington want we knew the story would eventually turn to the vote count in the house and that's where it is. after all the -- do you want to call it theater yesterday? >> i didn't think it was -- i was interested. i think it was boring. i watched a time of it. i had a lot of -- i was interested. >> because you know the lead on grudge was -- >> yeah, i wasn't bored. and i was unhappy when i was watching on krn and fox, i went back and forth when they didn't have commercials and right in the middle of a person countering with something that a time of -- they take a break. that is maddening. >> it's frustrating. i always think the same thing when we break into the hearings. but paul ryan talked about how he thought it was contractive to get some of these ideas out there and talk about it. >> there is no real progress to
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be mad. >> republicans would like to go back to the drawing board and do the things that the sides can agree on. those are pretty good things. one thing i don't like is when you go back to -- when the democrats talk about all the horrible anecdotes and cases about pre-existing conditions, that's -- there is a bipartisan consensus on how to fix a lot of that stuff. and if you did go back, you could do it step by step. you wouldn't deny people because of pre-existing conditions. you wouldn't -- but -- but i don't think they even necessarily need to go back to the drawing board. i think they need to take all the ideas that are out there, some that have been mentioned and meld everything. >> you don't think that, but the republicans think they're not going to cover $0 million people until you -- >> but you are the minority. and there have been a lot of really good ideas from the republican, bus you are the minority party. >> you are the minority party,
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but you can't stop it so do it, then. >> that's what they're going to do. >> but they're probably not going to be able to do it. >> i wish there was a middle ground instead of going back to zero. >> you've got both houses and you've got the president. >> i know. but if you read our e-mail, people write in and say -- >> well, if republicans had voted, they may not have kept it from happening, but they haven't helped, right? >> well, i agree, though. i didn't want them to pass the bill that was out there. >> every party has that dynamic. >> you even had -- i know that. i know that. but it's true that i think yesterday the president helped more for the left, the radical left than he did for the right. >> ying there was any progress that was made yesterday. >> but your point is that -- >> is when he can go -- now it's up to the blue dogs.
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if you get that, then you can do direct consellation. and he can say to the far left, with you want the public option? i've done everything i can and i couldn't get them on board. i thought the president was pretty presidential yesterday. i thought both sides really clearly stated their point. but you say we can't throw it out. there is not a single republican that says we should immediately cover everybody with the system we have right now. i think the problem is there are millions of people that are uninsured. the other is that the cost structure is out of control and they have not done enough to cause the control. >> coburn, with what you'll save
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there, you'll be able to cover everyone. the way to do it with the democrats is cover everyone and figure out how the costs come down. there's two different ways of going about it. but if you guys control everything, if you can get the votes, do it. >> something needs to be done. >> but if you don't want to throw away what they have right now, then you are now in that camp. >> no, that's not true. there are things that both sides agree on. if they would start on those points, they could do that. >> but i don't think b all the degree of medical certainty democrats think that. any plan out there is one that would caught -- that's not the plan, though. >> i did at some point. >> yes. but that means taking what you have here and snarering it down
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there there. >> so there's five or six -- if you went back, when it's this much, when it's a sixth of the economy, it should be both parties doing it. >> you can start from here and work your way down to here. instead of starting from here and all we're going to do is -- because i have heard some republicans come across and say, we're okay with tort reform and if you will allow them to buy across state lines. >> it would be a career ending vote. >> newer not going -- i don't even know what the describeny plan would be. >> the skinny plan taxes about doing half of what the old plan does. >> then what we're arguing about is whether or not you're going back to scratch and starting over. >> you heard it said you could have a bill to sign in three
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weeks if you went back and did the things that people agree on. >> i think you and i are arguing semantics. i'm thinking of the skinny bill when i say whittling it down. >> obviously, democrats would say this bill was born in a committee made up of republicans and republicans. they say we did all this work. >> or can we at least take a couple of things that we all agree on. >> they forgot the cameras were on. >> right. they all have a chance to -- the president said that. that's what elections are for. if we go ahead and try to do it, either it happens or it doesn't happen. if you don't giek what when he did -- you know what? we should have a talk show. where we talk about all this on tv. oh, we have that. congress continues to work on a
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jobs bill today. work stalled yesterday as how democrats disagreed on how highway money should be sent. house leadership says that work will continue today on an agreement to prevent the benefits from expiring this weekend. the house and senate jobs bill differ both in scale and approach. at the height of the financial crisis, the financial borrowing exceeded $100 billion. >> we made it through a week of allowsy durables, lousy new home sales, and as becky told you at the top, we're going to get revised gdp out today, a lot of the kal darns, guys, talk about
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fed president evans giving some comment taer, i'm assuming snow doesn't get in the way. for the first diefrt being, things are positive. the 10-year note as we watch t bonts bond markets been 36.46 is the yield on the 10-year. gold, which we haven't been paying a lot of attention to given everything else that's going on, up $3.30 to $111.80. chloe cho is standing in singapore and first we'll go to london with carolina climente. >> good morning, to you, carl. here in the last trading day of
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february, we have some very good data. the fourth quarter gdp was revised up 3%. the service sector groou grew 5 five faster than lefted. . good news in the banking seco seconder. in germany, some bad news for greece as the greek government prepares for a second round of government bond issues next week probably. we're expecting this for next week. two of the most important german banks involved in public financing, i'm talking about hypo real estate, they had not response to the banks being gone. the banks itself will no longer
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lie the greek governor any longer. so next week here in europe, all the eyes are on the greek second round of government bonds issue this year. these are the news for europe. let's take a look at what's happening in asia with chloe in singapore. >> thank you vovp. we had a mostly positive session, of course, a lot of markets making up for some lost ground, given that we had a two-session sell-off. the nikkei slightly higher by 0.2%. cpi once again disapointing. 11 straight months of deflationary worries. once again, the same chorus line from the boot that they're intending to do that. song coming, higher by 1%. some positive earnings numbers
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coming out from whine that union c con. it did close higher by 35%. then again, it did miss all expectations with a pop of as much as 35%. a very interesting story out of china, they're starting to stress test on certain exporters to see ouch they could come with the levels of a stronger renminbi. and this story, once again, stregerred a lot of talks that this may be the first between toward a big adjustment. india, higher by 1%. investors cheering the indian market today. the key points of the budget will be fiscal prudence, rolling back on stimulus. returning to double digit growth rates going forward, this year
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they're startinged at 6%. next year it's 9%. food inflation is close to 20% because of very severe rain storms which happened earlier last year. let me send it back to you. good happy friday, everybody. >> very happy chloe. we'll see you next week. and from wells fargo securities, plaque vitner. >> the last several numbers we've gotten, including the unemployment, there seems to be indicating a turn around. do you think this tells you where things are or do we need to wait a couple of beaks before things turn up? >> what we're seeing is the
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handoff from growth being driven almost entirely by revenue. when the public equitier was feelel demand. look what happened with housing. final demand isn't all that strong. it's not a double dip. we don't see the economy sliding backwards. it's shift to go a slower rate of growth. >> what will start to push things apart from the sector? >> if you look at hours worked, the income from work has risen at an 0.8% rate. even though we haven't seen any
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increase in employment, we are seeing that people are beginning to early more money from working. now, over the course of the recession, the amount of income earned from work dropped 20%. so we lost a lot of it. about half of that was made up by some sort of transfer payment, the continued extensions of unemployment. >> fred, we've been talking about a lot of the things that have been rocking the market over the last several weeks. one of the things at the very top of that list is what's happening with greece and what is happening with the euro. there are some hedge fund managers that this has been a very popular trade to shorten the euro. how much of a factor does that play, do you think, in what's been happening and how much of this is jrl just general concern, not only about what's happening with the euro but with what we see with rates and other issues? >> becky, we've seen the currency markets to be tight
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over the last year. when i look back over the last few months, what we have seen has been a lovelily month for the u.s. mchas the euro has been under fire with concerns not only in greece, but if that is extended to spain, it's extended to portugal, and i think that there is a high degree of anticipation about what the euro community is going to do in terms of initiatives that it's putting to greece, how greece will accept them and we've seen the markets move up and down day-to-day. this morning, we have a bounce in the euro. yesterday, it was the opposite reaction. so it is on the minds of investors. the good news that i see is that the u.s. stock market has been in a pretty flat trading range over the last three months as the euro gave up about 10% versus the dollar. it could have been a lot worse. we had a lot of worries earlier in the year about unwinding the dollar carry trade. we don't see that happening.
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i step back and look at this point and say this isn't a bad time to make some portfolio adjustments, take advantage of the dips, but we have to be mindful that we are in a global economy and euro stability is one of the key factors to make things work. >> what kind of adjustments would you be making right now? >> well, if investors have lighten up their equity exposures, particularly retail clients are sitting on a lot of cash. they pulled back dramatically, did not come back in last spring. they were waiting for a dip and stability. we're looking at technology, we're looking at flrg, we're looking at some of the industrial plays that got a lot of attention in the fall that have kind of gone sideways. where those companies should be reporting very strong earnings, we ought to be seeing upward suggestions for the guidance for the first and second quarter should be moving up. analysts had been behind the curve in terms of raising
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estimates, particularly for q2 and q3. we're looking for decent numbers coming out in april. >> mark, if you had a question for chicago fed president evans who we hope will be joining us later this morning, what would it be? >> i would like to know what they're looking at to see what the impact of the remoemp moefl of the quantitative easing is going to be. everybody is focusing on mortgage rates, but it's really all the secondary impacts. although that money that was plopped down in the financial markets helped bring credit spread back down. i wonder what they'll be looking at as they decide what will come coming back into the markets. >> all right. assuming he doesn't get caught in the snowstorm, hopefully we'll see him this morning. >> thanks, becky. >> you, too. coming up, we'll check in with our friends at the weather channel, if they were able to get to work. are they around here? >> no.
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atlanta. although a lot of them have been out and about. >> yes. >> in fact, scott williams, i saw him, i think it was in washington during the last story. >> did you take a train back yesterday? >> i did. >> it was not too bad. >> it was okay. i would not have wanted to fly, though. >> no. and your arms would have been tired. "what do you mean homeowners insurance doesn't cover floods?" "a few inches of water caused all this?" "but i don't even live near the water." what you don't know about flood insurance may shock you. including the fact that a preferred risk policy starts as low as $119 a year.
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for an agent, call the number on your screen.
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welcome back. october futures relatively positive on a friday morning after making up for lost ground in the middle of yesterday's session after miserable data. making headlines today, toyota will miss its north american production target for february through april by 20%. the report says toyota has told parts suppliers the production for the period will be 350,000 units due to depressed sales as a result of all those recalls. in washington, vice president joe biden will unveil rules aimed at protecting environment savings accounts. weather is crazy in the northeast. you want to get your winter storm forecast. scott williams is safe, though, from all. no problems getting to work for
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scott williams at the weather channel. >> that's right. no problems here in atlanta, but big problems there as we move into sections of the northeast and new england. and that is where we're continuing to find this snowfall here. take a look at the wind. new york city gusting out of the west, anywhere from 20 to 30 miles an hour. the heavy snow continues to fall around philadelphia, also into the baltimore area, as well. new york saw about two inches of snow in the past hour. so as we move into new york city, new york city schools, of course, closed, something that doesn't happen too often in new york city. philadelphia still seeing that snowfall. as we move into the baltimore area, it continues to come down. the storm intensified rapidly overnight. we'll continue to find the area of low pressure meandering here around the northeast and new england during the day today and the afternoon and the evening hours. we'll continue to find additional snow on top of what we saw yesterday, about 10
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inches of central park yesterday. so 4 to 6 inches for you in new york. places like pittsburgh will see some of that snow continuing to add up here as we go in time. pittsburgh, about 5 to 8 dashls inches. elkins, west virginia, 6 to 10 inches. current conditions right now at newa newark's laguardia, we have the snow coming down hour by hour. we'll find delays. we're finding a bit of snow around the arklatex and the rain. have a great weekend. back to you. >> scott, thank you very much. you have a great weekend, too. when we come back, we'll get more of the morning's top stories.
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good morning. welcome back to "squawk box." can understand? >> that one, i understand. >> i know. but can understand what he's saying? he's a nut. >> this song, i can't. this song, he enunciates this one clearly. >> he comes out, doesn't say hi. he just gives everybody a dirty look and leaves. wacko! anyway, i'm joe kernen along with becky quick and carl quintanilla. making headlines this morning,
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lenar making a deal to acquire 2,700 home sites in 38 communities across florida. they're located in first time home buyer master planned active adult communities. and premier golf course communities in tampa, orlando, jacksonville and southeast florida markets. that got a rise out of it. >> adults? >> i think they mean no children. i don't know what you're thinking, but -- >> is that what your plan is eventually? >> yeah. sounds great, doesn't it? >> play golf all day. >> no. maybe. you know what i say? that climate is coming here. i don't have to move. >> that's true. it's here now. >> yeah. >> mcdonald's is cutting prices and taking competitor's coupons in china. a pr official tells china daily the promotion is the first that the chain has offered since entering china back in 1990. it's expected to run until march 23rd. we'll see what that says about
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the chinese consumer. >> theater. cutting price peps. aig and the government are reportedly using cash flows to repay debt. the company thinks it can get the money to repay $8.5 billion of the $25 billion that it owes the new york fed. among the option webs it's considering cash from its businesses and cash sales. i guess the question would be whether the insurance regulators would allow them to take some of the cash from the businesses. that's what the regulators did not allow the first time around that caused the problem to begin with. >> reading. >> you've been on a plane again. >> no. remember, that's what happened. he said we're not going to let them leave these insurance companies without paying their premiums. >> oh, oh, oh -- >> i was so excited that morning when i knew the answer.
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>> i know. >> as we wrap up this week, it seems like a long week after last week was shortened. futures have lost some ground, still above fair value. we'll see what happens to that 5-7. chicago pmi and existing home numbers, as well. oil is a little higher today despite the chopping in the forex markets. 10-year note still around the range we've seen in the last couple of days. the dollar has been relatively soft overall, although the euro, as you know, was 1.35, now back too 1.36. gold is adding a few dollars today, still above 1100 at $1,170. it's up $3720. >> so the futures fits now, bob iaccino, bob, you know, i know that you're not necessarily an economist or someone that lives and dies by every government
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figure, ewe bits really uneven. i remember when i got back -- has it only been a week? it had been after a week of good numbers. which is it, is the economy good or bad? >> christ, i don't know, joe. do you see the skiology of what's going on behind traders and investors? they're lying scared rabbits. they hang on to every little last block of news. when you talk to a lot of investors and financial planners, they're doing more esoteric things with their clients than they did in the past. it's been going on in the institutions for years. you're hearing things like covered calls. you're not hearing a lot of people in this whole buy theory that people have been talking about. there's a jitteriness to the market. you see people buying dips in towards the end of days like yesterday. but there's no security in the political climate is not helping at all. >> yeah.
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you say krieps. >> krieps. >> it's a common chicago -- that or we're going to have to put you on a delay or something. >> gosh dang. >> you're a trader, i understand that. >> come from back there. >> but they'll blame us for letting you say it. >> he said cripes? >> he didn't say cripes. >> oh, i thought he did. >> far be it from me to see that the euro goes to a dollar, but this is pretty deep. these guys are plowing on into the euro and there's no relief in sight. what do you think finally happens? is it good for us or is it bad for us? >> well, i think in the short-term it's bad for us because the importers are helping us come out of this and helping to give some people the idea that the recovery has legs. but i think over the long run, it proves out again that there is no short-term view of the
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dollar losing its reserve currency status, which overall would be good for the u.s. we get the budget deficit under control at some point. and then the dollar strength follows with that and helps us like it did in years past. the euro is an interesting situation to me. you have sort of a situation between greece and the eu now where you're seeing the different cultures and the different sovereign governments, yet the one currency causing problems that people maybe didn't expect. the european culture is such that it's not like a bunch of states united. if we issue treasuries, all of us, all 50 states issue treasuries, here you have a sovereign nation issuing bad debt that could be speculative in doing the right things for all this time. so it really puts a negative spin on the euro for the long-term in terms of whether you can have that in terms of your portfolio and have it be secure. >> this is like a secretive
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kaball, they almost make it sound like. they talk about how these hedge fund managers sit down last week and they were eating i think it was lemon roasted chicken and filet minon talking about some of their best. you can sit there and talk about whatever you want. soros had that piece where he talks about how the euro could completely collapse because of what's happening in europe right now. but you start to wonder if it gets the same sort of zen around it that we had back when the investment banks were in trouble. bob, are people talking about it in the pits there like it's some sort of a ka balance at this point or are there very legitimate concerns about what's happening in greece and with the euro? >> well, i'm glad that somebody else said it about the euro collapsing. i don't think the euro is going to collapse. but it highlights a problem with some of the deep rooted cultural nature of europe and having them be one economy.
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>> but not one political structure. >> exactly. when it was rallying, and it looked -- you know, the dollar was going down and it looks like that was working over there, for some reason, that always galled me that you think you could have three years of unemployment insurance and all this unbelievable, you know, net, safety social nets and you never have to pay the piper. the euro keeps going up, and here we are, free market model for the world. it just didn't seem fair, bob. >> well, i -- i don't want to, like, cast a paul over the euro than already is. >> why? >> nobody is listening, anyway. >> we have tens of dozens of people out there. >> they're listening to you guys. i run a multi hundred dollar business here. >> exactly. >> to me, it's a situation where you can't homoginize the governments, you can't measure it, you can't manage it.
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and there's certain parts of the sovereigns that can't be controlled, at least preemptively by the euro zone. and it's the problem would i have had all this time about the euro think -- obviously, i'm not the only one thing it and you're not the only one thinking it. now you hear about special drawing lines. >> time. >> and i think soros wrote out, you can't have a federal reserve without the treasury arm of the whole thing. and at this point, it's germany that's essentially the treasury. >> so a one-armbandit. >> right. >> you've got countries like greece and they would like to buy more money off balance sheets to spend it to help them people. you get a great investment bank in the united states to do that and i'm not going to name names. >> goldman sachs. >> or jpmorgan or whoever.
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and then goldman sachs realizes, oh, there's some problems here and then they bet against it. isn't that fair game? sth going to be a smoking gun to the end of days. and in reality -- >> and in reality, it's not like the same guy who is lending the money and making calls on the call zap swaps. >> i know. so you guys are okay on -- >> well, i think most conspiracies give way more credit to the government than is due. >> but you would satisfy your clients' needs, whether it's a sovereign foreign country. and then if you're savvy, you say, oh, my god, you would do that. >> so is it the equivalent of predatory lending here, i mean, to a homeowner? >> or some people even said it's like buying the insurance on your neighbor's house and then,
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you know -- >> the incentive to light it on fire. >> exactly. >> jim paulson is one of the guys who -- i'm sorry, john paulson is one of the guys who was with this whole thing where he was betting against the euro for a while. remember, paulson is the guy who made all that money by shorting what was happening in the housing market. identities he's changed his minds. he's out of the betts now and he's more bullish on europe. so you wonder if some of the chaos is going to wind down. >> anyway, bob, we'll will you go here. >> thank you. >> jim paulson is our guest host yesterday. john paulson is who we are here. >> cripes, we have to move. >> yeah. if you have any comments or questions this morning, send us an e-mail. squawk@cnbc.com.
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welcome back. modest gains for equity futures this morning as we await quite a bit of data including revised gdp. japan's largest brokerage says it will raise $3 billion in its first ever sale of nominated dollars and bonds. it features a diamond selling a 507 karat diamond for $35 million today. the sale breaks the record as the highest price ever paid by a rough diamond. the fan and a pressure of ice.
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>> i'm not. >> i am. ger makes diamonds, but no one can know that. >> they make nano tech diamonds. >> maybe it makes more tens sense than the walking man for $150 million. or that roscoe where he was looking for his brush and knocked over the paints that -- well, i think i can pass that off to some idiot. anyway -- >> let's get a check on the world outside the world of business. monica novotny is here. we'll start in afghanistan. the taliban claiming responsibility for an attack by five suicide bombers n afghan capital. this morning, at least, 17 people were killed and dozens were injured in those blasts. here at home, veteran congressman charles rangel violated house rooels rules. the new york democrat maintains
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he did not know who had paid for those trips. have you heard? there's a storm out there. it's all over the northeast, being blamed now for at least three deaths. at the airports, you've got hundreds of flights canceled, hundreds of thousands of people now in the northeast currently without power. i heard one reporter, guys, this morning at newark airport continental international terminal saying they expected it to be slow when they got there. there was a huge line that was not moving yet, trying to get out of the country, but it doesn't look like it's going to happen any time soon. >> monica, it's nice to see you. i can't remember the last time we've seen pup. >> it's been a few days. >> you're available, like scott brown's daughter. >> what? >> that's what he said. >> i know. i remember. >> she's available -- not in the same way. i didn't mean that way. all right. see you later. >> bye-bye. have a good weekend.
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>> coming up, we have markets on the mind. guest house barry -- i want to see knapp. you've got the k. why not use it? either drop it or let's use it. can i -- >> you can use it. >> changing people's last names is joe's thing. >> he's changed carl's last name. we'll be back on "squawk box" with becky quick and carl quintanilla.
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welcome back. joining the fun this morning, our guest host for the next coup hours, barry knapp, head of u.s. portfolio strategy. you know him from the show. great to have you braving the snow, making your way to the desk. you went into the year pretty defensive. you could argue overall your fears have been boerne out? >> yes, that's recentably accurate.
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the concerns were that growth would initially accelerate and we'd get worried about fed policy. turns out we wound out being more worried about chinese central bank policy than the fed. but, still, we think that the end of quantitative easing has led to assets no longer rallying in the way that they were. and then eventually the liquidity draining will cause a selloff in the front end of the market. all of these things will conspire to make things a little rough in the first half of the year. >> is the mediocre data we saw this week any part of that, or is it weather-related? just one off? >> not really. i mean, when i thought -- when i thought through the potential scenarios for the first half of the year, i thought, well, there is some probability we'll have much weaker than expected data. we won't get the labor market restarted. to me that's a much worse outcome for the equity market. it opens up a whole new level of downcited. we still don't think that's the outcome. we think most of the negative data points we've seen are
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attributable to weather. the same thing's going on in europe, to some extent. we think the data will get better as the weather gets better. invariably the concern will be fed and withdrawing of liquidity. nonetheless, we thought sort of the corridor, fairway for things to be such right that we could continue to rally would be low. without that quantitative easing, we wouldn't have the firepower to push the markets. >> what about the argument we're beginning to hear and that is the difference between a government-stimulated economy and one that relies on real final demand is large. we're feeling that now. we're moving from one to the other. >> well, i think that's fair, even with respect to -- you know, i've been focused on monetary policy stimulus. so quantitative easing from our perspective, if you look at the period when it was heaviest, fed was buying 30 billion of mortgages a week or $25 billion if may, those are periods when the stock market did well. coming off that alone is playing
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a significant role in capital markets. as far as the real economy goes, you know, i think that's a decent argument as well. that as you -- you know, as the fiscal stimulus starts to dissipate, then you have to make the transition. the government's spending is 25% of gdp up from 20% of gdp. that's probably not a path we all want to head. >> we'll talk about this over the next couple of hours. so far, barry's track has been pretty clean. >> and barry's going to be with us for the rest of the show. when we return, we have more of the this morning's top stories. plus, friday morning quarterbacking. two congressmen, two parties, two verdicts on president obama's day-long health care sum.
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wall street ready for a fight. ♪ the dow clawing back from a nearly 200-point deficit yesterday to finish with modest losses. the vix pushing higher, toe. ♪ eager to plow ahead. what was accomplished at yesterday's health care summit and what it means for your money. snowicane, whatever you call it, it's making things right down tough. >> snow is nothing but annoying, icy frozen water stuff that falls out of the sky at inconvenient times. it's mother nature's icy, screw you. >> the direct impact on the economy as "squawk box" begins right now. ♪
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. good morning, welcome back to "squawk box" on cnbc. i'm joe kernen along with becky quick and carl quintanilla. mack didn't make it in today, so -- >> he didn't? he's got a long commute. >> we have rob. a couple of countdowns there. >> i'm ready. i was ready twice. packed lineup. coming up shortly, key lawmakers reacting to yesterday's seven-hour health care summit. it went an extra half hour. i watched it. >> you watched -- >> i'm impressed. >> really? >> yeah. i was really -- i was curious but i was listening on the radio. i didn't get home to see it. >> yeah. i was interested. i don't know. maybe we're wonky covering it too much. we'll hear from both sides of the aisle pretty soon, charles buss a boustany along with charles miller. cam fine -- cam is for
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cameron? >> yes. >> tells us about his -- >> it's camden fine, i think. >> yes. with treasury secretary tim goo geithner. and jobs focus. we'll hear from a number of panel members, including chairmanwoman carolyn malone any. we've been watching the futures this morning, and things are looking a little better than yesterday. at this point those dow futures are up by by 17 points above fair value. a lot of this has been driven by currencies, you know, the dollar showing not quite as much strength today. that's probably why you're seeing a turn in the futures. we've been watching other stories this morning. vice president joe biden set to unveil new rules to help protect workers' retirement savings accounts. the vice president will be delivering a report to the labor department today. the department will make the proposed regulations available for public comment until may 5th and then niche a final rule.
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mcdonald's is cutting prices and honoring competitor's coupons. the chain is also planning to expand in china. opening up to 175 new stores and expanding the number of drive-through outlets. toyota will miss production target through april by 20%. japanese newspapers say toyota has told parts supplier that depressed sales as a result of the recalls and probably because of the stop in production as well. the president, as you might have heard, sending that clear message that democrats will move along with health care legislation with or without republic support. >> this is such a complicated issue that it's inevitably going to be contentious. but what i'm hoping to accomplish today, is for everybody to focus not just on where we differ, but focus on where we agree.
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>> here now, some raek to yesterday's summit, congressman george miller, also congressman charles boustany, one of 14 house members who are doctors. also member of house ways and means. good morning. >> good morning. >> congress miller, nobody is too surprised at how events transpired during the meeting but where do we go from here? >> i think where we go from here is we're going to continue to try to pass the national health care insurance reform in the congress. and hopefully we will do that within the next month or so. i think it's incredibly important that we pass this legislation. as you know on your show, health care costs are not sustainable. they're out of control. they're crushing businesses. they're crushing families. and they're crushing our economy and our ability to compete in the world. i thought yesterday was a very good, in-depth candid discussion about some differences but also about a number of areas where we agree on the same problem.
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we attack it somewhat differently, on whether or not you can sell insurance across state line, whether or not children should stay on their parents' policy, whether or not there's too much wasteful spending in health care programs, and how do you extract that and how do you get those savings? there was a lot of back and forth that, you know, i was kind of impressed with how in depth the discussions went back and forth between republicans, democrats and the president. >> it was definitely in depth, all seven hours of it. congressman boustany, your thought on the meeting and then your thoughts on what -- i mean, is it now just a matter for you and your party of just watching the democrats and see how far they go? >> let me just say as a heart surgeon with 20 years of experience in an operating room, i'm an optimist by nature but i'm also a realist. i don't think much changed here, although we did go into depth if a lot of issues and we do have a number of areas where we have
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broad agreement. i really still think we could could come to some agreement on a number of these things. we believe with a complex problem like this, you have to break it down. that's why we think it's still important to reject this current bill. let's take a step-by-step approach. we think that's the better way to go. >> walk me through the sales pitch. if i'm a moderate house democrat, i voted for it the first time, you want me to vote for it a second time, convince me, especially given the fact that the house has done a lot of work over the past couple of sessions, that have gone unappreciated, you could argue, by the sfat. w why would i take that risk again? >> we believe the senate will be able to pass this legislation. we think they'll be able to do it with a majority vote. that should encourage the members of the house. members of the house know when they go home they hear about families losing their health insurance, families that can't get health insurance, people thatment to start a small business, want to change jobs
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and are locked into that position because of our health insurance system in this country. they also know that our budget, our economy, our deficits cannot continue to stand us doing nothing about this. and you can't do it piecemeal. you don't get the savings. you don't get the efficiencies. you don't get the advantage of technologies if you think you can just do this one piece at a time. we've been doing that for 60 years. and we ended up with a system that's ready to collapse. as i say, is crushing businesses and families with its outrageous costs. its uncontrollable costs. >> congressman boustany, no question the system is about to collapse. the question is, do you want to pile more weight on top of it? can you walk us through a realistic vote count going on? even though the threshold is lower for speaker pelosi, it's difficult getting there. >> i think it's going to be difficult getting the votes in the house. there's the stupak block, there are a number of moderate
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democrats who may have second thoughts about their initial position. so, those are moving parts that still need to be, you know, worked through. you know, we'll have to see what happens. i think the ball's really in the court of the democratic leadership as to how they're going to proceed with this. then, of course, we'll have our response to it. i still believe when you have a very complicated problem like this, we're not taking it piecemeal. what we're doing is breaking it down into manageable parts so we can really understand what we are accomplishing. also, keeping an eye toward really bringing down the costs for families and small business owners. that's the real goal here. >> i see you shaking your head congressman miller. we had this debate, for ten minutes this morning, the idea of do you lower costs and then cover people or do you lower costs by covering people? >> you can't get the savings from the insurance reforms. you can't get everybody covered with insurance if you don't put them into the system. you don't get the efficiencies and the savings from doing that. what you end up with is what we
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have today, a very segmented system that's very, very expensive to run because it's not comprehensive. the parts of the system have driven it to be so expensive, that unless you make it comprehensive, you just don't get the reforms. and more importantly, the benefit for the deficit, for the budget, for people paying for their policies. they don't get that benefit without a comprehensive solution. >> do you think congressman miller, is the president done being pulled by the far left, by the calls for a public option? i notice there were some calls from kucinich and -- >> that would not be news. that would not be news here. the public option is not going to be in this bill. >> i understand that. >> the president put out his principles. you know, he looked at the house and the senate bill. he said, these are the things he thinks should be included in our considerations. and i think now it's up to the democratic leadership and the democratic caucus to provide the votes to pass the bill in the house and in the senate. >> congressman -- go ahead, joe. >> i just wanted to --
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congressman, one other -- one thing i was struck by is that on both sides of the aisle, at least there was the concession that if you are covered, we can admit this is the best health care in the world that we have here. >> oh, i think we have great admiration. >> okay. i'm going somewhere with this. and it is expensive. congressman boustany, heart procedures are expensive. so the notion that you can give this top-shelf health care to 30 million more people and actually have it lower the deficit, that's what has people worried, that are already covered, the 85%. they're worried that you can talk about cost savings. we heard paul ryan and congressm congressman, but the quality they're getting, if you cover 30 more million people and save money, that's not logically possible. >> you saw agreement on both
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sides talk about 30% of the money we're currently spending today is wasted. you heard that from dr. coburn, from congressman boustany and others. >> i want to respond to that. putting everybody in doesn't necessarily bring down the costs. we're seeing that with medicare today where we have all the seniors in and yet costs are escalating out of control. the bottom line is what you have to do is focus on where those real drivers of cost are. that is, look at the doctor/patient relationship, look at what drives doctors' behave. allow for better coordination of care. we haven't addressed that sufficiently in my opinion. we didn't really discuss it to the extent we needed to yesterday. i think there's some room for common ground there. i think that's really where we need to focus. putting everybody in doesn't solve the problem. it may make it worse. >> leaving 30 million people out, those people get sick, they go to the hospital, they have operations, they get prescription drugs. and it's just that everybody else is now paying for that. do you want to put that into a
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system that works where you get the efficie savings or you just want those people wandering around in and out of the health care system with nobody track wag they're doing, just spending other people's money? >> i believe we have a duty to do reform but we also have an obligation to make it right and make it fiscally sound. so that's why we're taking the approach that we take. >> well, it's hard to tell what's more fascinating and historic, the politics or the policy, because they're both important in this case. congressman, appreciate your time. thank you very much. >> thank you. >> 14 m.d.s in the house. >> only two in the senate. >> both republicans in the senate, coburn and barrasso. in the house, do you know how it's split? are there any pro this plan m.d.s in the house? >> i don't know. >> i would imagine -- i mean, the ama could cut some deal, but individual doctors. why would they be, you think, bau a lot of the costs are --
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>> especially not knowing what the end result is going to look like. probably anybody talking about their entire career and things being changed, not knowing what the end result is looking like, not knowing what the rules are going to be. >> some of the doctors run for office. that's how bad it is. in studio to talk about their thoughts on the market, we're lucky to have two guest hosts, tony made it out. >> two hours of sleep, two hours of guest hosting. >> and this ought to be interesting. you might say something on television. stick around, you who knows what he'll say on no sleep. and barry knapp of barclays is here. tony, since you're new, why don't you tell us what you think after hearing a couple days of bernanke's testimony on the hill. does it change your outlook on what the fed is doing? >> no, as long as they use the magic words, extended period, we know the fed will be on hold for at least six months. that's what bill dudley told us.
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he said extended period was the language the fed has put in the policy statement, means at least six months. it was a phrase repeated by st. louis fed president bullard recently. so whenever bernanke puts his word in on it as well, we can feel assured that the fed is not likely to move for at least six months. the fed needs to be very clear at this day and age. so if they're telling us that that's what extended period means, that's what it means. and so, until there's some other clarifying comments, that's what we have to go on. >> we had somebody who told us yesterday that maybe they could move 25, 50 basis points. it's not the extended period but they're focusing on the incredibly low rates. either one of you guys quily think that's the case? >> the focus is on the extraordinary program and the fed is looking to withdraw those. it's in the winddown mode. focus on interest rates will come later. you'll see a change in the language, perhaps, but that will
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come well before the change in interest rates. >> barry? >> my perspective would be it's not -- rate hikes that are actually going to matter -- >> the rest of the qe? >> it's ending qe, liquidity draining. 2004 was a great analog for that. by the time we got to the rate hikes, the stock market correction was virtually over. the bond market conundrum had started. so for me it will be the first half of the year where we worry about ending the extraordinary programs. >> barry and tony will be with us for the rest of the program. we have more to talk about. >> yep, this storm, a powerhouse storm dumping more than a food foot of snow in the northeast. weather channel's mike sieidel s in binghamton. >> reporter: this storm moved west towards the coast and that's why yesterday boston, most of new england had rain and not snow. now, sh's pretty much going to
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see snow when it falls. we'll see several more inches in new york city, primarily this morning, several more inches through tonight and then the winds will begin to back off. we've had 2 inches an hour this morning at newark international. it's almost the first of march. the sun angle is much higher and stronger. once we get through mid to late morning that radiation will get sdmru that will help out the roadways that are plowed and salted. the interstates by midday should be fine, turnpike, all the major highways. also we'll see the winds backing off and the snow coming to an end. becky, another tough day at the airport. there's going to be a lot of cancellations again at the new york city airports from low began also down to philadelphia. back to you. >> mike, thanks. it gives us something to look forward to this afternoon. mike seidel, once again, we appreciate it. >> he knew your name. >> if he have any xhenlcommentst anything you see so "squawk" -- that's because he was with us last week -- e-mail us squawk@cnbc.com. don't blame the shorts, robert sloan, we'll get his
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thoughts on how regulatory reform could impact hedge funds and capital markets. time now for today's aflac trivia question. what was the rolling stones' first single? aflaaac! our little friend here has spent ten years trying to get your attention. but, some of you still don't know quack about... aflac! so, give me ten seconds to fill you in. if you get sick or hurt, aflac pays you cash, fast to help pay for things major medical insurance doesn't. like car payments, mortgage and more. and now let's see if this duck - is chicken. if all you know about us is... aflaaaac! ...you really don't know quack.
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now the answer to today's
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aflac trivia question. what was the rolling stones' first single? the answer, "not fade away." ♪ i was going to be >> our next guest thinks the new s.e.c. short sale rule, that it falls seriously short. joining us from new york, robert, managing partner, also author of the book "don't blame the short sale." that probably is misleading to say you think it falls short. that doesn't make sense. you don't want it to be stronger. you don't like it the way it is, right? >> i think, you know, what are we trying to address? we're trying to address investor confidence. and i think what this will actually do, increase volatilely and will increase long selling when you put these circuit breakers on. i'm not sure you actually get what to what you want. >> it's similar to an uptick rule, a various of an uptick rule? >> no, that's right.
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>> we always understand -- we understand that you shouldn't be able to do naked shorting, but it's hard to enforce that, right? is it possible to enforce that? >> well, no, actually, there are rules in place. i think it's regulation 204, that you have to buy in the stock if you have a fail on your books after three days. so those rules are on the books. that should clean up the problem. >> well, what we always come back to is, you obviously don't need -- there's no downtick rule in long investing, right? >> correct. >> so, it just doesn't seem quite fair. why the s.e.c. decide to do this, political pressure or is is it lodge snik. >> it's interesting -- don't take it from me. inc. if you read the testimony from commissioner casey, she makes it feel how she feels about the new rule. >> 3-2, right? >> i'm sorry? >> it was 3-2. it wasn't like a slam dunk. >> correct. when the release comes out next week we'll comb through that. >> what were the unintended
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consequences to this? there are a lot of people that are not outright short. they're hedging strategies and such. what are the unintended consequences? >> well, i think, you know, shorting is how the capital markets hangs together. so if you go to any wall street firm that rents its capital so we as investors can get our money when we want it, i.e., liquidity, it's all about offsetting risks. that enables them to rented their capital to people when they want it. shorting is a huge part of that. any product area on wall street, you've got to short stock to offset risk. that's how you get money out of the marketplace. one of the things we forgot about amidst the crisis is that other markets froze, equity factors traded. you got your money. you may not like the price, but you got your money. the reason you got your money is because people that had capital to give could offset risks. >> during the crisis, i mean, you see it everywhere, that the argument is that shorting had nothing to do with the crisis. we do know, though, that you -- you know, the credit default
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swap market, while large, there were certain parts of it where you couldn't really game it, maybe, but you could certainly cause people to question the viability of a firm and then short the stock against it. i mean, that was a strategy that may have been employed to take some of these firms down, no? >> well, you bring up a good point, which is, why is it just a cash market when you're talking about shorting? the sophisticated investors can use derivatives, swaps, all sorts of option strategies, futures. there's a lot of different ways in which you can short stock to effect a negative bet. you're right in that regulation always seems to focus in on the cash markets and doesn't know what to do with derivative markets. >> so, if this stands, what are you going to do? >> well, you know, my worry is that it's an incremental encroachment on liquidity in the marketplace. i don't think that's very good for anybody. >> robert, we appreciate your time today. >> sure. thank you very much for having me. >> you're welcome. see you later.
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>> all right. coming up from the health care debate to job creation, the joint economic committee searching for answers on how. we'll have several members of that panel in the next half hour. as we head to the break, here's a look at the widely held stocks. "squawk box" on cnbc returns.
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futures are above fair value on this last trading day of the week. if you have any comments or questions about anything you've seen on "squawk," e-mail us at squawk@cnbc.com. up next, cam fine, the independent community banker ceo, met with tim geithner yesterday. we'll talk about what went on behind closed doors after this break. we've secretly replaced these diners' at&t smartphones
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♪ ♪ i came in from the wilderness a creature void of fur ♪
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♪ come in she said i'll give you ♪ >> shelter is exactly what a lot of people are looking for with with at least 8 inches on the ground at central park. >> more in other places. we got a foot where we are. >> us, too. >> boo hoo. >> i like the snow. >> you on would rather have snow than rain you said the other day. welcome back to "squawk." we're watching the weather and the futures relatively quiet although some people expecting a whacky day. we came off -- we were down 188 yesterday. and closed down 53. so, we'll see what happens. for the time being, futures moderately modest. wall street's biggest challenge may be getting to work. the snowstorm blanketing the northeast. in new york area expected to go until tomorrow morning. >> that true? >> yes. new york has closed their public school system. something mayor mike bloomberg was hoping to avoid. so schools are closed.
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gm trying to revive a possible sale of its hummer division, according to reuters. the company has contacted previous bidders for hummer after the deal to sell the division to china fell apart in the absence of any deal gm has already announced plans to shut the brand down. the ceo of crocks is s is resigning. he says he'll retire march 1st and replaced by the company's coo, as the company reports a fourth quarter loss. a narrower one than wall street was expecting. remember we used to talk about crocs. >> i still have my pink ones. >> they sent some. >> and then they had the lined ones and all those bells and whistles and we wondered if that was the -- >> jump. u.s. monetary conference taking place in new york city. fed presidents from around the nation making the trek, despite the snow. senior economics reporter steve liesman also managed to get there. you live there.
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joins us -- >> no, no -- >> are you in jersey? >> no, i'm in westchester. >> you live in new york. >> i got on the train and made a pathway and left the shoveling to my wife and children. >> that's just like you. >> got on the train this morning to get here for the monetary policy conference. i want to talk a little bit about yesterday and the fed chairman's speech at the senate. it looked like the fed is back in the game on a number of fronts, particularly involving supervision and regulation. one of the things the fed chairman said is that they are looking into this greek debt situation and goldman sachs and the other banks. sources telling cnbc that the fed is looking into whether or not these banks followed supervisory guidance on a number of areas. particularly involving risk management and risk management relative to their reputations. let's listen to what bernanke said yesterday. >> we are looking into a number
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of questions relating to goldman sachs and other companies and their derivative arrangements with greece. and on this issue as well. as you know credit default swaps are properly used as hedging instruments. >> i agree. >> we -- the s.e.c., of course, has been interested in this issue. obviously, using these instruments in a way that intentionally destabilizes a company or country is counterproductive. >> the s.e.c. also told cnbc that they're looking into this issue of derivatives and their ability to cause, and i quote here, catastrophic harm. to used to blow up a country. greece had its own problems for it's own reasons but whether or not these derivatives made it worse. also talking to senate, a wall street journal story, the fed may be back in the game when it comes to supervision. the issue was left for dead in an earlier version of regulatory reform. listen to what judd gregg said
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before he got to his questioning in instructor to remarks to ben bernanke. >> i want to associate myself with senator bayh's comments in your range of regulatory authority you should retain. i think it is important that you be a major player in the regulatory atmosphere. i do believe that there are obviously errors that have occurred across the regulatory regimes, that yours are no more grievous than anybody else's and in many ways less grievous. >> one huge area that has to be dealt with according to fed critics, and i think they'll talk about it here, when it comes to bank regulation, at the top of the fed almost nobody is in charge. they sort of pick a governor. that governor is sort of in charge of the banking supervision part but that really isn't. that's something they have to handle. on the economy, bernanke said it was weak and that was disappointeding. he was asked about stimulus, he said if you're going to do additional stimulus, you need to tell markets what the five-year plan is to reduce deficits.
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joe, carl, becky? >> thanks, steve. we're looking at the aig. the stock isn't called up anymore, i think. they're saying a lot of things. you can imagine the financials when they talk about losses for the fourth quarter, but i'm looking at things like this. that it believes -- the parent believes it has sufficient liquidity at the parent level to meet its obligation for at least the next 12 months. this is the one that kind of got me. did you read this one, becky, that if additional support is not available, there could be substantial doubt about the ability to operate. i'm worried about taking that out of context out of the press release because that's a flash. >> right. >> but, it was a significant fourth quarter loss, obviously. that's not a surprise to anyone
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either. >> this is in five different pieces. i'm still going through it. >> they're announcing additional attempts to sell some of the businesses as well. >> they don't quantify what -- how much additional government support they would need. >> right. >> do they? >> no. in discussions with the third-party regarding the potential sell of alico and overall expectations that both the property and casualty market pricing will continue to decline in 2010. >> you see -- >> it's now down. it was at $27.51, now down at least $1 on the ask at $26.50. it was a $55 stock in the last 12 months and it was a $6 stock in the last 12 months. >> the line believes it has sufficient liquidity at the parent level. you see that? >> yes. >> nor the next 12 months. >> for the next 12 months. >> but then -- you up to speed? what finally happens here? as a taxpayer -- >> a company i don't look at.
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you can ask me a macro question. >> let's talk about macro issues of government funding some of these companies. do you think it will continue? that it needs to continue? >> bernanke in section 13-3 gave the fed the ability to give companies that money under unusual circumstances. he said, if i can quote, as for any involvement in the winddown of failing firms we would be happy if you -- you meaning the congress -- could find a solution that allows us to give up that authority. so the fed wants to get out of the game. >> barry? >> well, the only comment i would make with respect to aig, and i haven't looked tat it rea closely recently, but the assumption to make the whole code numbers work, to be able to pay off all creditors, you have to sell all these assets at two times book or above. the whole insurance sector trades at one times one book. you know, to think that it goes back to the mean of the last ten
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years at 1.6 or above to sell these assets seems a bit unlikely. i would argue the financial sector isn't going back to 2 1/2 times book any time soon. they have to wind it down and sell it and cash flow numbers are tight. so, again, i haven't looked tat closely in a while, but i would support it's going to be pretty dicey whether all creditors get made whole. >> that plan was written by a rosy scenario. she's a great writer. >> absolutely. >> robert ben lachey did make comments, he said we're mixed as how we see their business over the long term. one of the most respected and diversity capital operations in the world. they do say that all of these things will help them meet their goals of repaying taxpayers and providing value to the communities where we operate. doesn't sound like they're throwing in the towel on any of this stuff. >> i don't think the cash flow numbers are so negative -- you
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talk about this liquidity insolvency, right? you may or may not have a solvency question here. liquidity problem was resolved by the government, to some extent. the question is, the ultimate outcome, is there anything left for shareholders? unlikely, but perhaps. like fannie and freddie? why did they trade at $1 a share? >> have you ever had carl's junior? >> i know their calorie count is relatively high across the fast food universe. >> you live in california. you see a lot of carl's junior -- >> in and out burger. >> yeah, that's from the big lebowski. i die grease. being acquired for cash, an $8
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stock. >> they're elicit superior proposals from third parties for 40 days, through april 6th. >> fast food. it's great for me, anyway. >> between coke yesterday -- >> it is surprising to see private equity jumping back in. so with private equity jumping back into some of these situations they may be raising some money, too. keel keep an eye on that. already the stock's moving on that news, cke restaurants. tim geithner reiterating the white house's goal for strong financial reform. meeting with executives from top financial services trade groups yesterday, cam fine was there. he was supposed to make the trip to new york but, obviously, the snow kept him in washington. he is the head of the independent community bankers of america. cam, i know you went into this meeting yesterday with the secretary thinking that small banks are very much behind this idea of the volcker rule and you would like to see if involved with financial regulation.
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but that is a rule that's kind of been forgotten over the last couple of weeks. did you sell the secretary treasury that you want to see it in there? what was his response? >> yeah, we like the volcker rule at icba. i cannot say that my colleagues from the other trades were real supportive. but, we're supportive of volcker, as are five former treasury secretaries. i told geithner that icba was in favor of the volcker rule. and he noded hded his head and agreed there needed to be curbs on proprietary trading for institutional institutions. >> but, cam, you're not expecting the volcker rule to go through at this point, are you? because it's kind of fallen --. >> not per se, becky, but doi think that the congress may give the systematic risk regulator the authority to impose those types of rules. on certain firms, particularly those firms that are insured by
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the fdic. i think you could see the regulatory agencies take some action on that. >> cam, hi, this is tony from pimco. >> hi, tony. >> who do you think the systematic regulator should be? they're trying to strip the power away from the fed, which regulates so many things. who do you think the regulator should be? >> we think systematic risk regulator should be the federal reserve, or they should have a systematic risk council with the chairman of the fed as the chairman of the council. we think it's a poor idea to have the secretary of the treasury as the chairman of a systematic risk council, because then you inject direct politics into bank supervision. that type of politics has no place in direct supervision. >> did you tell geithner that, too? >> yes. >> he nodded his head at that? >> with all due respect i told
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the secretary i didn't think he should be the chairman of a systematic risk council. he didn't react one way or the other. he kind of nodded and smiled. >> this is barry knapp from barclay's capital. >> sure. >> there is this story that's come out over the last couple of days about the administration considering a moratorium on all foreclosures, whether -- you know, until it's been run through the hamp problem. now it will be optional mandatory, i guess. what's your point of view on that? >> we would oppose that. i think any kind of artificial stoppage of foreclosures across the board, all you do is kick the can down the road further. i mean, that's not going to solve the unemployed homeowner's problem just because you have halted foreclosure for a little while. i think it actually makes things worse when you interrupt the process like that. >> cam, there was a big story on
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the front page of the wall street journal this week, i can't remember if it was yesterday, but it came after the fdic came out and said there are real concerns about what's happening in the banking sector. t"the wall street journal" said lending of banks has dropped by the biggest percent we've seen since 1942. they compare this to almost what we've seen going way back to big, big problems over decades and decades. is that the case, are banks loaning right now? >> i think there are many parts of the country where banks are not lending. and there are two reasons. one, you have to have a borrower. there just aren't a lot of people coming into the front doors of the banks asking for loans. particularly in the community banking sector, which lives on small business loans. you have to have a small business man or woman to come into the bank and ask for a loan before you can make a loan. but even more importantly is we're in the harshest regulatory atmosphere, i think, in generations. i mean, banks are just crawling down into the fox hole and
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buttoning up because regulatory authorities have way overreacted and are being brutally harsh on bankers across the board. >> cam, i wish we had more time to talk. hopefully we'll see you in studio once again. thank you for your time today. >> thank you. when we come back, congressman brady and congresswoman maloney will preview job hearings. we probably had more snow in new york over the past 24 hours than in international falls, minnesota. we will keep you updated all morning long on the weather situation in the northeast when "squawk" comes right back.
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a lot of people think lehman was the epicenter, but you couldn't let this guy go, american international group. that's what people finally decided and there were bonuses and geithner is still dealing with that decision. no one's gotten more money, i don't even think fannie and freddie have at this point -- >> they have unlimited -- >> well, aig is not done either. initially it ran up to $28 a share, aig, but now you can see where it is. says may need additional u.s.
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government support to meet the obligations as they come due. even on the futures, i don't know, it just reminds us -- reminds everyone of what still needs to be done in terms of getting rid of all this toxic, can i say -- if you can say cripe can i say -- >> no. >> okay. i won't. the joint economic congress set to hold a hearing. joining us carolyn maloney, chairmanwoman of the joint economic committee and congressman kevin brady, republican from texas, deputy whip and means committee member. chairmanwoman, i was reading some of the notes. you mentioned trying to help small and large companies create jobs. we have forgotten about large companies recently in all the rhetoric. it's almost a dirty word. they create jobs, too, right? >> absolutely. and they're more likely to keep those jobs. >> yeah. so, i also saw that you -- the private sector is the way to do
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it, the only way really, right? the government could help but we need it from the private sector. >> that's right. at today's hearings we'll be looking at three areas. the best way to help spur job creation in the private sector and we'll also be looking at targeting what sectors of the economy are most likely to improve and provide jobs in the future. and thirdly, what sections of the country are going to be expanding and building jobs. >> congressman brady, the best place, i guess, to help do that in the federal government might be the fed itself. how can congress really help create private sector jobs? >> well, a couple things. one, i think we need to stop frightening the horses. i think businesses very much are reluctant to bring back that new worker, hire a new one or make that -- add that new warehouse. they're very frightened about tax increases from health care and the mandate, cap and trade's impact on them, more tax increases in the future.
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i really see that as the biggest obstacle, economic recovery, is that uncertainty. and i think in many businesses it's the fear. >> congresswoman maloney, there's a point there. i mean, the administration and the president, obviously, a lot of tawdry baif got us into the mess. and there's a back lash and a populous sentiment in the country against big business. but could you at least concede that an administration that seems to be kind of -- not a friend of big business. it's hard to talk about jobs at the same time that you're scaring a lot of big businesses with some of your proposals. >> well, i feel as though the administration is backing job creation with the targeted tax credit. it is very similar to the bill that i introduced. it's more now, but it passed overwhelmingly with bipartisan support in the senate this week. we hope to pass it in the house with bipartisan support.
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giving tax incentives and really helping business, large and small, hire more workers, giving them that confidence and that support. so i'm hoping that my colleagues will be part of the bipartisan team that will be supporting this job creation tax credit. will you be supporting it in a bipartisan way in the house? >> actually, i won't be. i'll be glad to talk about it. >> 61 in the senate is overwhelming. 70 is almost unanimous. >> that's true in the senate. it's very hard to get anything -- it's hard to get a majority, much less 61. 61 in the senate is a very strong -- >> like overwhelming. >> the. >> congresswoman maloney, first of all, great to see a republican and democrat standing next to each other. we're seeing a lot of this lately. a lot of it. we hope in the heartland that this leads to something that will help the american people because it doesn't seem like a lot of good has been happening in washington of late, many would opine.
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the problem in the job market are structural and not cyclical. how do you really address the structural problems? the automobile industry or housing industry, the jobs lost there, they're not coming back to the extent they existed before because levels of activity won't reach the levels they were at previously, so there's a skill mismatch you could argue but those that lost jobs there in terms of jobs available. how do we create jobs? >> the recovery will be long and slow. but let's put this in perspective. the last three months that president bush was in office, this country lost over 750,000 jobs a month. the last month he was in office this country lost 779,000 jobs. the last three months that president obama has been in office, this country lost 35,000 jobs. last month it was 25,000. so we're trending in the right direction. there are glimmers of hope, green shoots, as our chairman bernanke says. so we are moving in the right
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direction. and we need now to figure out the best bang for the buck, to give incentives to the private sector hire to hire, expand and grow. we are building -- we have restored the stability of many of our financial institutions. we are going in the right direction. it is going to be long and slow, but we are making progress. >> great. we appreciate your time. we have no time. congress people, thanks. it's just too hard to go into all the woman, man -- no, thank you. we appreciate your time. >> thank you. >> it is nice. what is it -- >> representatives. >> yes, that's good. that's good. >> take a look at that jobs bill. >> they're talking. >> look at this. we're engendering bipartisan -- >> it's because of the way we do things here. when we come back, more aig news. aig saying they may, in fact, need more government support to continue their operations through the course of the year. also former fed governor fred
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myshkin going to join us at the top of the hour. we'll get a lot more when "squawk" comes back. i was just in town for a few days, and i was wondering if i could say hi to the doctor. is he in? he's in copenhagen. oh, well, that's nice. but you can still see him! you just said he was in... copenhagen. come on! that's pretty far. doc, look who's in town. ellen! copenhagen? cool, right? vacation. but still seeing patients. oh. [ whispering ] workaholic. i heard that. she said it. i... [ female announcer ] the new office. see it. live it. share it. on the human network.
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cisco.
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it's a snowicane. >> ow! >> blizzard conditions in the northeast canceling flights and causing havoc on the roads. but the markets can't be stopped by mother nature. we have the instant reaction to this morning's latest report on the nation's gdp. digging out some investing
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opportunities. sometimes it's not so easy but scott black has a few names that could heat up your portfolio. figuring out the fed. we have former fed governor rick mishkin to the rescue. no need to shovel, the snow will still be there when "squawk" is over. we begin right now. ♪ i'm mr. snow ♪ i'm mr. icicle ♪ i'm mr. 10 below the snow is falling. as soon as the roads get clear, they get covered again. the commute is nasty. no rush to get out and shovel. hours of snowfall still ahead, but only one more hour of "squawk" is still ahead. i'm joe kernen along with becky quick and carl quintanilla.
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>> and then your car service will shuttle you -- >> i don't think i'm going to even try to -- >> no? >> maybe not. >> this is not porsche driving weather. >> it works. it's got great snow tires and rear -- but it's so low. >> can't get over the mounds of snow. >> yeah, yeah. >> hard to control other people driving. >> it is. two guest hosts that fought the snow and made it to the stud studio. the only bond guy that qualifies really to be guest host, i think, tony crescenzi, we've had you matched against others but only you have the savvy and the know -- knows enough, really, to sit here and actually be with us on set. portfolio manager also for pimco. also barry knapp, head of u.s. equity strategy for barclay's, who's also -- >> fantastic. >> fantastic. and no slouch at all in any of this. >> no. a lot going on. . two major economic releases on the docket. in about 28 minutes' time we'll
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get the first revision to fourth quarter gdp. first estimate put growth at an annual rate of 5.7, they expect that to be revised up to 5.9. 10:00 commerce will report on january sales of previously owned homes. forecasters see sales rising by 0.9%, but we know the new home numbers for january were a little disappointing. economists say they would not be surprised by a drop. earlier in the week new homes fell to the record low for january. ahead of all the numbers, futures were a little positive, but then aig came out and lowered the futures somewhat with some of their headlines, which joe will talk about in corporate headlines, i'm sure. >> at some point i will. do you want me to do that now? >> yep. >> shares of aig under pressure this morning. the company reporting -- look, it was at $23. fourth quarter loss warning it may need additional government support. thomas h. lee partners buying cke restaurants on the east coast. if you're not familiar, those are carl's junior. carl's junior.
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they make a bacon western cheeseburger and they put an onion ring right on the cheeseburger. i like it. but, you know about me and fast food. anyway, it's $11.05 a share and they want more if they can get it from somebody else. the deal valued at $619 million, excluding debt. >> somebody thinks they're going to get more because it's above that bid. >> i remember the guy -- carl used to do his own commercials for a long time, until he finally -- >> and then they got paris hilton. >> exactly. then they got paris hilton, which was -- >> kim kardashian's doing something, too? >> they had them washing cars and it was -- >> that was a good one with paris, yeah, a lot of suds and water and everything. >> it was hot. >> it was hot. gap posting better than expected fourth quarter earnings. retailer also raising its 2010 dividend by 18%. don't really think of this as a
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yielder. shares rising on the news. watch the shares of acina health, investors punishing the stock after they announced their postponing fourth quarter earnings release. they say they need more time to complete a year-end audit and conduct an internal accounting policy review. you know who that is, right? that's our friend billy bush. >> not jonathan? >> interesting. he's in the middle of this whole health care -- >> i was reading something, i think it was "the times" or something wrote something up on this in the last week or two. >> it's ugly. just those comments, postponing this, checking this out, looking at this, because it's been a high -- >> there were some allegations by one of the major newspapers -- >> doing pretty well. >> maybe it was barron's. a former fed insider joins us for the next hour as well. with us right now from new york is rick mishkin, the former
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federal reserve board governor, also a columbia university professor. rick, you say that people are m misinterpreting what the fed's doing. there's been a lot of fed speak. bernanke's been out for days. you were in the room with him. why don't you tell us the message they're trying to send to the markets right now. >> the misinterpretation is people don't understand there's two very different aspects of what the fed is thinking about doing right now. one, is the issue of dealing with all of these facilities and the balance sheet that the exit from all these very extraordinary actions that the federal reserve had to take during the crisis, which are things that i think were absolutely necessary, but on the other handen the right things for the central bank to be involved in in the long run. so the fed extended credit facilities to whole new parts of the financial system. it also ended up intervening directly in credit markets by purchasing a lot of private securities. again, something central banks
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don't like to do. they expanded their balance sheet to a huge, huge extent in this process. so that's one element of what they -- what they were doing. the other element is traditional monetary policy and actually where you set the federal funds rate. what the fed is in the process of doing is to exit from these extraordinary actions and extraordinary policy tools because they're not the right thing for the federal reserve to be involved in in the long run. for example, right now the fed is i huge player in the mortgage-backed securities market. and that's something that is very unusual. it was necessary in order to make sure that the housing markets recovered, which was key to the financial system recovering, but you do not want to have a central bank involved in something as political as mortgage markets. that's the most politicalized part of the financial sector. and financial marks. a and the fed shouldn't be there in the long run. at some point they have to get out of that. that's part of the issues they have to think about. they have to get back to operating the discount window in a normal way.
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that means getting discount rates up. that's completely separate from the money tear policy end. what's happened, when they raise the discount rate by 25 basis points, there was a lot of interpretation in the markets saying, the fed's raising interest rates, it's going to be more likely they'll raise the federal funds rate. i think that was just a complete misinterpretation. what you then saw, of course, is the federal reserve officials had gone back and explained over and over again that that was not what they were doing. that it was done immediately, it was done in chairman bernanke's testimony the other day. so, clearly the fed has a very difficult communication problem, but the markets have to understand that there really is an issue of getting back to normalcy in terms of one part of their activities and then the issue of what is the appropriate setting of monetary policy is something completely different. >> we also have, professor, two guest hosts with us today who are on set. both tony and barry knapp. i know tony has a question as well. >> governor mishkin, you today -- i think you're at the intercontinental hotel, is that
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correct, to deliver your paper? >> i certainly am. i was supposed to come into the studio but the delightful weather prooenltevented that. >> it's an important topic because financial conditions, of course, had gotten materially worse after lehman collapsed. it looks like based on financial conditions index things have gotten better. financial conditions, for those that don't understand, we're looking at transmission effects of monetary policy, how it goes through treasury yield, et cetera. it looks like from these financial condition indexes that things are much better. you argue in your paper that things are not necessarily so because of impairment to certain areas of the marketplace. can you tell us where particularly you see these difficulties and challenges. what it means where they are and how it might affect the economy in 2010? >> here, i think, is the key thing. when you look at sort of many of the traditional elements of the
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way financial markets work, there's been a tremendous recovery. if you look, for example, at credit spreads, things of that type, where those went through the roof during the crisis, they've recovered tremendously and are really where they should be given the state of the business cycle. we're still in a severe recession. what is very different about this cycle is that we had a huge growth in what has been termed the shadow banking system. that a lot of these extension of credit no longer operates in the traditional way through standard issuance of bonds or through bank lending. and that has not recovered. so, very important in items of going forward and thinking about where the economy is heading, is that although there's been recovery in a lot of elements of the credit market, this new part of the market, which is incredibly important, it has still not recovered. i'm suffering from this. i have two houses. i can't sell one. the jumbo market is not back yet
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because the shadow banking system that supported it is no longer operating the way it did before. so, that's going to be a long time to recover. it's a complicated thing to get that back. and that is a drag on the economy. >> rick, can i just go back to what's going to be happening. you laid out what the fed's done, what it's got to do at this point in terms of getting out of the unusual programs it's in and then looking at potentially raising rates down the road. if you had to guess, do you think the fed will raise rates this year or is it just going to be stuck in that process of wining down the other quantitative easing programs? >> well, you know, from my personal perspective, when i think about what monetary policy should be, there is a tremendous amount of slack still in the economy. the economy is recovering. we have avoided a depression. the likelihood of a double-dip recession is very low. but on the other hand, this is not something that i see as a strong recovery. in fact, that's also reflected in some of these issues i just mentioned about financial conditions in terms of the weakness of the shadow banking system.
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so given that, that the inflation rate of anything is on the low side from what the federal reserve would like it to be, and also that we're going to have all this slack for a very long period of time, it does not make sense at this juncture to think about raising interest rates. the fed's made that very clear. >> how quickly could that change? i mean, how quickly -- >> i think that the -- there's two things that could change it. one is a much stronger economy than anybody is predicting. again, i don't think that's what we're going to see. the other one is the wild card which is if inflation expectations get out of control. that has not been a problem so far as inflation expectations, quite well on choranchored. no reason for them to rise unless the wild and crazy guys if washington, the politicians, make it very clear that they're not going to be fiscally responsible, or that they increase their attacks on federal reserve independence,
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weakening the ability of the fed to withstand political pressure to keep interest rates too low for too long. if those problems develop, then we could number a different ball game. you know, i'm hoping there's going to be sanity in washington. that, you know, there's always a question mark. in the long run, america usually has done things right. you always worry a little bit about, are we going -- is something -- is this time going to be different where we're going to have a change, where instead of being the united states of america, we become more like argentina? i don't think that's going to happen, but i hope it does not become more. >> professor mishkin will be staying with us throughout the rest of the show, as are tony and barry. we have more to stick around for. stay right there. >> more like france. not really argentina. >> we'll take france or norway. 90% rates in health care for anyone. we are waiting on the data point of the day, first revision to fourth quarter gdp coming out in 17 minutes. also, the financial crisis
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inquiry commission unveiling its findings from january. we'll talk to commission member and former director of the cbo, douglas holtz-eakin.
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welcome back, everybody. right now the futures are a little bit above fair value. up by 10 points after the day ended down yesterday. by only just 57 points for the dow. don't forget, we have the gdp revision number coming up in less than 13 minutes. stick around. the investigation into the causes of the financial crisis is fully under way. today the financial crisis inquiry commission takes the findings from its january hearing to leading economists and policy experts. douglas holtz-eakin is on the commission. he's the former director of the congressional budget office. as well as the white house's chief economist. good to have you back. >> good to see you. >> we loved watching last time all the bank ceos. this one's going to be a little more wide-ranging, right? you're doing everything from firm structure and risk management to monetary policy. >> we convened a two-day panel with a group of experts who have
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looked at what, i think, is the big environmental issues that surrounded the big name players that we heard about, the lehmans, the bear stearns. we'll hear about the conduct of monetary policy, randy kroszner talking about the notion of too big to fail and moral hazard issues. we have ann marie talking about the financial capabilities of americans, how equipped are they to understand their own financial situation. so we will literally span the entire range of issues that have surrounded this crisis. >> how does the commission do this sort of csi work about the past when we have aig out with headlines today saying they may need more government support, this financial reform bill is apparently going big guns between shelby and dodd and corker. i mean, are you having to keep up with this even as you -- as you do this investigative work? >> certainly. in many ways the financial crisis is not over. this is not yet a piece of economic history. we're living through the
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after-effects every day. so we try to stay abreast of those developments. certainly it's important to follow developments on the hill regarding financial regulation reform. my own view is that financial regulation reform's not a bill. it's an ongoing process in that our findings will feed into if not the initial piece of legislation, everything that follows thereafter. so, it is an important portfolio. it's very large. and i'm pleased that we've made the progress we have. but there's a lot of work left to do. >> what do you make of the bill as it seems to be coming together now? it looks like the fed's fortunes have improved from the past couple of months, you could argue? >> i think a lesson we've learned f only by watching the health care bill s to not draw judgments about the final bill too quickly. there's a long way to go. we have a house bill. we haven't seen the final senate legislation. they would still have to conference those. but we do know there are issues that have to be addressed in terms of the transparency of some of these markets, in items of the notion of holding adequate capital and having capital that would be available in a crisis.
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and certainly the authorities to monitor not just consumer issues, but safety and soundness of the largest institutions. >> how much can you -- should we be blamed for wringing our hands over aig this morning? how serious is that? >> i continue to be concerned about the overall situation. aig's one symptom, but we have seen what appears to be a very rapid recovery of some of our largest financial institutions. one hopes that's real, but there's a lingering concern at least on my part that in their effort to escape the t.a.r.p. and some of the political interference that came with it, they have too quickly tried to get some private capital in and declare their safety and soundness. we want to make sure that's true. >> can you think fast in i ask you something about the cbo? >> i'll do my best. >> you saw ryan yesterday. he didn't say he was arguing with the cbo's analysis. he was trying to talk about what the cbo was given to analyze in coming up with that $130 billion
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in savings for the health care plan over ten years. then congressman busara said you just said the cbo is no good at what they're doing. that's not what ryan said. can you explain what was going on there and the discrepancy? >> sure. the cbo, by law, has to price exactly what the congress sends them. they are not allowed to make judgments about the future. they have to take the bill at face value. and they're also precluded from making any policy jmgts. two things you can't say at the cbo is, that's not going to happen or it's not a good idea. you take the bill, you don't pass judgment on whether it's good or bad and you accept that everything in it will happen as it's written down. i think paul ryan simply pointed out there's good reasons to question whether that's actually how the future would transpire. >> okay. >> the question i would have for you is, we had former fed governor mishkin -- or have him with us. he's releasing a paper. and he contends that the
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securitization market is still, you know, impaired, which i would absolutely agree with. the question would be, you know, what are your thoughts around that? obviously, there was the yale university professor paper where he basically characterized the whole thing as a run on repo. any particular thoughts or views around how we restart securitization? >> i think one of the things we need to remember is that not all securitization is equal. we saw very different performance in auto loans, in credit card securitization than we did in subprime mortgages and the nbss in general. so i think one of the things we have to do is look at those that weathered the crisis better than the others. look at the incentives that servicers, for example, carry in those particular markets and try to replicate that elsewhere. without doing that, we're not going to get this very important credit channel restarted quickly enough. >> we'll be watching the hearings at the american university school of law, right? >> yeah. this will be scintillating.
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do not turn to olympic curling. >> there's a piece in "the times" today how big curling is because we run it. >> every time things got slow at the health care debate, i went right to curling. >> i watched it last night. i don't know who won the women's, between sweden and canada. i walked away at the last minute and then it was gone. >> cass is quoted in "the times" as saying, it's like drinking merlot, watching curling. good to talk to you. >> i would hate to make a comparison to our normal programming if they think curling is that much better. >> the argument "the times" makes is that -- >> i'm not talking about morning, really. coming up, value veteran scott flack with some picks that could get your portfolio out of the snow. no letup on the snow falling in new york. don't even try to shovel yet. you just have to do it again. watch "squawk box."
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♪ ♪ snshg yeah, it continues to snow here, but things are happening on wall street. up next, we have the moment we've been waiting for all morning long. the first revision to the fourth quarter gdp. economists looking for 5.9% up from 5.7%. we're going to find out what the number really is right after
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this very quick break. "squawk box" will be right back. 
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16 inches of snow at central park but gdp is still here. rick, let's get it. >> here we go. boy, the experts and the economists get one right. 5.9%. many were looking for slightly upward revision on our second walk around the block on fourth quarter gdp. 1.7% on the consumption, downgraded by 0.3. on the price index, moved from 0.6 to 0.4. don't worry about price appreciation anymore. and the q over q, that's quarter over quarter personal consumption extend tour. we could characterize this dramatically, pretty easily, inventory issues giving us a bit of a boost. many have seen this since editorials started popping up in july. it's the sustainability. now, post this number. we're not seeing a huge amount of movement in the fixed income
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side. in the dow jones industrial average futures are unchanged. the s&p futures moved from up about half to up one. so this hasn't altered the landscape. all eyes are fixated on foreign exchange. the euro is 135.65. not much different when i looked at 3:00 eastern yesterday. it's bouncing around. and the stories about what's going to happen with greece change quite often, trust me, the snow will be around probably a lot longer than any concrete decision in the next 48 hours from europe. it looks like their supply's delayed as well. this is a story to pay very close attention to. back to you. >> rick, a lot of people have wanted a stronger dollar versus the euro. is this not the way we wanted to get it or we'll take it? >> you know, once again, i think this is good. just from the vantage point that i don't like to use word
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inflation/deflation. a stronger dollar is going to help a bit with commodity prices. it isn't the only variable, but it is a variable. but if you're looking at trying to discern long-term positives about the economy or the country from the united states' perspective, the fact that the euro looks more crudy than the dollar when everybody's committing the same sins, that argument, i don't think, will get you very far. >> let's get more reaction. steve liesman is in new york. we still have our guest host tony crescenzi, for pimco, barry knapp, the head of u.s. equity strategy for barclays. look at this. so now you guys are together, steve. >> yeah. >> that's nice. that's nice. what do you make of what you just heard and then you go ahead, you you got a question for rick as well? >> well, you know -- >> for rick mishkin. >> yeah, rick mishkin's right here. just a couple things. i heard rick talk about the inventory number going down,
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just minus 16. it makes me think that some more of that might come out of the first quarter. so we'll see if that causes economists to adjust downward their expectations for the first quarter. i'm interested in the business spending number. i wonder if that was revised upward a little bit. that was one of the reasons why yesterday's durable goods number was not such a big deal because people thing business spending is still rolling. given what's happened, rick, the jobless claims numbers being uncertain, consumer confidence being way down, how much confidence do you have in the recovery? >> well, i think you can't take this big number for the fourth quarter gdp and think it's telling us everything's fine because a lot of this was an inventory push. it's part of what happens in a recovery. and there are a lot of factors saying here the recovery will not be that strong. it's solid in the sense we're no longer in a situation where we think that, you know, it's clear that the recession is over. we're getting recovery. but there's going to be no gray guns here. there are still a lot of
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headwinds that exist in the economy and consumers are worried about it. you know, the credit markets still are impaired, to some extent. we still have some issues to deal with. >> do you think the fed's prepared to do more? everybody's talking about them getting out. should they also be prepared to pivot the other way? >> i think the answer is, the key thing from my viewpoint, is that the fed does need to indicate that monetary policy will be accommodating for a long time, unless the situation changes, with a much stronger economy or inflation expectations start to get out of control. neither of those, i think, are in the picture right now. the issue that these other issues, is that you never know if -- financial markets start to deteriorate in a major, major way, that would be a whole different ball game and the fed has to be flexible to deal with that. otherwise it has to get back to normal policy making, which is focus on monetary policy as the
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key tool, and indeed, get away from all of these extraordinary actions which are not where central banks should be in the long run. >> joe, a corporate profits number in this data this morning. i'd be interested in that because by all indications corporate profits have been very, very strong. >> yeah, because we're all working our fingers to the bone, even on days like this, steve. we understand that. tony kcrescenzi, you have to follow these numbers closely to figure out what to do. do you have any comment? >> yeah. we're making references to inventories and the fact there's 3 1/2 point out of that 5.9% annualized gain came from inventories. when we look to the second half of 2010 we see that factor diminishing and also the fiscal impulse diminishing and even some monetary policy because the fed is pulling back could mean move up in mortgage interest rates. so when we look to the second half of the year, we see the economy in much different shape. it may not achieve the so-called escape velocity because it will
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depend greatly upon the private sector demand, which just isn't there. you can see that in these figures in levels of nominal growth in gdp. what i'm saying, again, this is all government-induced, inventory-induced and private sector demand being held down by slow income growth, low credit availability. these are factors that will be around for quite some time. >> the new normal, the el erian new normal. you get out there, get your talking points together -- >> this is how -- >> part of this -- >> but he's got the lingo. i mean, you can see he turns into a pimco strategist. >> we are on the puppet strings. >> right. they move you out to newport beach, you start -- >> not a chance. we invite lots of -- >> are you a jets fan now? >> any new york -- >> you're collecting stamps now, too? >> i've got a slightly different point of view on all this. i mean, most recoveries, and i would love to hear dr. mishkin's
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view on it, but most recoveries do start with an inventory cycle. it's pretty clear consumption will be held down to an extent, although in the fourth quarter that was primarily payback from cash for clunkers. in the second half of the year, the negative wealth effects associated with the greatest hit to household wet we've ever had should start to fade, right? most of the academic literature tells you it's a two to three year effect. by the second half those stayed. consumption should be in a better spot. savings rate has increased a fair bit. we could argue whether it needs to go to 10% or something, but still it's gone up a lot. dr. mishkin, do you think consumption will gain traction as you get into the second half? is that a viable or reasonable way to think about it? >> yeah, i think -- one of the things that is -- you have to use perspective and ask, what's the same right now, what's different? one thing you typically find after a very deep recession is a very strong recovery. and, in fact, you're absolutely
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right that that's frequently led by a turning around of inventories. we're seeing some of that here. but i think that we always have to understand that -- and so in this case, however, i think there are substantial drags on the economy that mean we're not going to have a v-shaped recovery. however, i think very important to understand that, in fact, there's a self-correcting mechanism in the economy that when things go down, they tend to go back up again. and that's part of what's going on now. so it's a question of, where we're going to be different is we're not going to have the usual super strong bounceback but we will have a bounceback and slow recovery but, in fact, a recovery that's solid, nonetheless. >> and then the key question or keyword, right, for the fed is, is it sustainable? i mean, the fed forecast is now 3 to 3.5, as the chairman said this week, from 2.5 to 3.5. if you assume potential's 2.8, i think, is how the fed's thinking about it these days, that s quote, above potential for this
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year and then even stronger next. right? which would imply -- >> right. >> -- you would need to normalize policy. >> but remember, it is sustainable. you're talking about growth rates which are not that much above potential growth rates which means you'll have a lot of slack in the economy for a very, very long time. i think that's the perspective we have to think about. yes, we're recovering. the recession is basically over. on the other hand, it's not like the unemployment rate is coming back super fast from the 10% level we have now. >> dr. mishkin -- >> what about your numbers for next friday? >> we'll talk when we come back from break, steve, maybe about that. numbers for next friday, we'll get that from tony. thank you, steve, rick santelli and professor mishkin. thank you, carl quintanilla and becky and thanking myself. up next, we'll be talking about digging for value. our next guest has been picking up bargains for decades. scott black has a couple of names that could have room to run soon. and if you're home on a snow day, sit back and enjoy. "squawk box" will be right back.
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take a look at the futures. under a little bit of pressure after we got the gdp revision numbers. we have seen some strength in the dollar after those numbers, weakness in the euro and weakness in the euro usually, at least lately, has led to weakness in the future. right now, you can see those dow futures are just below fair value. we'll see where things shake
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out. meantime, we're preoccupied with the snowicane dumping more than a foot of snow in some areas. the weather channel's julie martin is standing by at newark liberty airport in new jersey. obviously, it's been a real mess for transportation, for anybody trying to travel on business. julie, why don't you fill us in on the situation there right now. >> reporter: absolutely, without a doubt, this storm has hurt the airlines. yesterday here at newark, over 6700 flights canceled. that's over half of the flights that would normally fly on a typical thursday. now, today, they're trying to get things back on track. we've been dealing with very poor visibility, high winds gusting in the 30s and 40s and blowing snow. so, not ideal. many cancellations yet today. and playing catch-up is going to take a day or two for the airlines here. a tremendous amount of snowfall here at newark. if you take a look at the parking lot at the international terminal, not too busy whatsoever. we've picked up almost 14 inches of snow in just the last day or so. so, certainly going to be touch
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and go for all of the new york airports over the next 24 hours. hopefully by the weekend the arms can recoop lost fees and passengers can get to where they need to go. >> thank you very much. obviously, you can see how much snow she's standing in there. julie martin, we appreciate it. our next guest says the s&p is now fairly valued and it is becoming increasingly difficult to find cheap u.s. stocks, but he has a couple of picks that may still have room to grow. joining us is scott black, president of delphi management. you think the market is standing at fair levels? >> it is. it's approximately 16.5 to 17 times. the high s&p estimates are up in the 70s. we're in the 66 to $68 value because i don't have much confidence in the s&p 500 financials delivering. that's a 15% rating. it does represent good earnings momentum versus last year. it's up about 16% year over year. so, i think you have to be an individual stock-picker at this
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point, becky. >> an individual stock-picker. luckily, you brought along a couple picks for us. tell us about two stocks. one is seagate technology. why do you think it can still grow? >> we're in the tech refresh cycle. it will probably last another year and a half, two years, corporations have basically not spent money for pcs and laptops and infrastructure over the last five years. you have the overlay of windows 7. seagate benefits. pcs are growing at a 13% to 15% clip, notebooks, games, et cetera, across the board are doing well. and their earnings are exploding. they had a technical difficulty about a year and a half ago. they rectified it. it's selling at roughly 5 1/2 times calendar earnings this year. we have the revenues for this year ending june of '10 at roughly a 8% clip. the company generated over 800 million in free cash in the
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first six months. you know, if you have a market multiple of 16, a plus, and a stock selling at a 5 pe is ludicrous. plus the fact they have more debt than cash on the balance sheet. >> we have a lot of people who come on and say they like energy plays. you like nexun, a canadian energy company. why do they stand out? >> first, you have 6.5 billion barrels. you're paying $2.20 for the proven barrels. you aus have a free play called horn river, which is a shale play that they haven't booked. a 3 to 5 trillion cubic foot of gas if british columbia, adding $15 to $20 on a share. on its own merits you have volume metric growth of 6% this year. they should do about $1.95 to $2 which puts it at an 11 multiple. four times over discretionary cash flow. much cheaper than sun core.
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it's a well-run company. the balance sheet's conservative. the coverage ratio's intact. i think it's an interesting way to play energy prices. >> the biggest risk for either of these plays, technology and energy right now, scott? >> okay, the biggest risk in technology is the that the tech cycle fades fast. instead of lasting a year and a half or two years, there's a quantum burst and it's over. obviously, energy prices, commodity prices, you know, retract. we've been between 7 # $0 and $80 a barrel. down think we're going back to $50 or $60 a barrel but obviously that's the risk here, becky. >> scott, always great to talk to you. we appreciate your time. >> thank you very much. >> thank you. all this snow is not going to delay the opening bell ringing at 9:00 a.m. eastern time. what should investors expect as we close out the month of february? we'll talk to art cashin and get the trader's edge. check on the dollar. you can see what it's doing against the basket of currencies for the march contracts.
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time for the trader's edge. art cashin director of floob operations at ubs financial services made his way to work. how hard was that? >> i had to make sure i had enough antifreeze and i'll get more later. >> hey, to what extent does the weather affect markets, volume, that kind of thing today? is it serious? >> actually, i do think it may have an impact. we've been very low volume anyway but i think with some of the areas that were hit before hit again and now new york included in it, i think you might see trading slow down. i'm hearing offices around town are running with skeleton crews, so i think it might slow volume down. >> and then the whole week has been characterized by weird rumors and reports, right? apple is going to split, the chinese are stress testing, china is buying gold. right? all these strange, a lot of them in foreign newspapers. >> yeah.
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i think what's happened is as people have begun to worry a great deal about the greek criess they're searching news sources they don't normally search and that is leading to strange discoveries like the china stress test and purported purchase by china of the imf gold. we even had a strange headline that accounted for much of yesterday's rally. it came out about 1:15 and seemed to indicate that the eu was pledging not to let greece go under. it turned out it was a headline too long for some computer screens and at the end of it you found out that it was really the opinion of an advise r and was nothing to do with the eu. that started yesterday's rally. >> art, have a great weekend. stay warm. no lack of ice cubes for sure. >> no. we're very happy about that. thank you. >> see you monday. coming up, parting shots and then a chance to dig out of t s
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this. >> we've got 90-mile-per-hour winds in new hampshire. that's where you get the hurricane effect. >> we're not there. squawk will be right back. >> supposed to be 50 here.
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all right. we have a big monday coming up from "squawk box." on monday morning we'll be joined by indra nooyi pepsi's ceo talking about all things pepsi, what she sees after the coke move from yesterday. great time to have her because she is ms. pepsi and we'll be sitting down with mr. coke, the oracle of omaha, warren buffet. indra and warren back and forth getting some questions together. i'm guessing she'll have pepsi. i'm guessing he'll have coke with him. we'll see what hams. it is part of our three-hour special with warren buffet, march first, starting at 6:00 a.m. eastern time. he's putting out his letter to shareholders tomorrow morning on saturday. he'll answer any question that you have on that letter and other questions. e-mail your questions to the buffet mailbox at cnbc.com. go there and it will direct you to the mailbox. >> "the wall street journal" is running some headlines that the citigroup proxy is going to be filed later today and they're going to reduce their number of directors from 17 to 15,
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announcing that armstrong and mulcahy, i assume ann mulcahy and c. michael armstrong will be leaving the citigroup board and that former mexico president dsideo is slated to join the citigroup board. we'll find out more later when they file their proxy. >> william christopher? >> no. >> he hasn't done a lot since m.a.s.h. >> let's go to some parting shots. who wants to start? we could go alphabetical. give us some nuggets. >> sure. we're actually reasonably optimistic, unlike a lot of guests, about the macro economic outlook. we think the erratic pattern in the data recently is largely attributable to weather. as the weather gets better the data will probably get better but far less optimistic about the capital markets and think that the slowing of qe purchases is the reason why the market has stopped rallying in a highly
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correlated way. some of the more cyclical equity market sectors, financials, energy, materials are struggling with this. the most interesting question for me going forward in the second quarter will be as the fed starts draining liquidity through the supplemental bill program, the term deposit facility, and reverse repos will be what happens to the front end of the treasury curve? do we start flattening? how does the market react? >> let me, with the short amount of time we have let me just say when you're investing you have to think in terms of risk diversification. asset diversification doesn't equal risk diversification. remember there is equity risk in a bond and interest rate risk in a stock. think in terms of those things, liquidity and volatility. when investing in this choppy environment you have to think along the lines of risk factors. >> professor? >> so, you know, things are looking up in the sense that we're getting steadily out of the mess we were in but i